Investors who are cautious and are sticking with cash may want to consider alternative options. According to Matthew Bartolini, the managing director and research head of SPDR Exchange Traded Funds, active management can provide stability and income, as well as create more opportunities for upside. Bartolini shared these insights with CNBC’s “ETF Edge” this week, highlighting the consistent performance and improved tax efficiencies that active fixed income strategies offer. He also mentioned that forward-looking returns are looking better than they have in the past.
Bartolini emphasized that active management gives investors more flexibility, and he believes that the benefits outweigh the risks. However, he also cautioned that higher returns come with higher volatility and warned that cash carries its own set of risks due to reinvestment risk.
Dan Egan, vice president of behavioral finance and investing at Betterment, noted that it’s challenging to persuade investors to move away from cash, especially when they can get a risk-free return. The appeal of FDIC insurance also plays a significant role in people’s sense of safety. Betterment’s website currently advertises a variable high-yield cash account that pays 4.75% APY and is offering new customers a promotional rate of 5.50% for three months.
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